Human resource Strategy for Globalization of Business Processes
Globalization of business operations has become an imperative strategy for businesses to grow and sustain their activities in future because of the driving forces of market. The two most significant changes that have enabled businesses to expand across borders is liberalization of economic policies in developing countries like India, China, South Korea etc. and the innovations in the IT sector which has made accessibility of information and transaction of business infinitely easier. All businesses aspiring to grow by exploiting the immense opportunities offered by these changes must respond to the market forces and develop strategies to expand their operations globally. However, expansion of operations needs careful planning to prepare and allocate the resources according to availability and demands.
One of the most important resources of an organization is its human capital, the skills and talents that reside in its work force. Deployment of this capital in the most optimal way reaps a number of benefits and facilitates the implementation of its strategies for growth. Therefore the human resource strategy for globalization must include all its functions; namely selection and recruitment, training and development, leadership and motivation, conflict resolution and stress management, ethics and diversity management and numerous other areas that have evolved with changes in the global business environment.
The situation addressed in this paper is of a multinational company which is contemplating an expansion strategy for it healthcare business in South East Asia and has appointed an internal business consultant to recommend human resource strategy to supplement its business expansion. The discussion below attempts to outline the specific methods to build an effective network of skills and knowledge through acquisition and training to facilitate a step by step implementation of the expansion plans.
Factors affecting Human Resource Strategy for Globalization
Globalization of business activities must consider the factors associated which lead to acceptance or rejection of the firm by the local people. Before actually embarking on the transferring of operations to a new location, the following factors must be considered and addressed to make the expansion strategy a success
Cultural factors
Every country has a culture unique to its own and respecting it is necessary to establish itself in a foreign country for multinationals. The local culture may be immensely different from that of the foreign country. In order to win the acceptance of the local people, MNCs should not do anything that would offend the cultural trends of the local people. For example a MNC’s advertisement for Cornflakes implying Indian traditional breakfasts being unhealthy is not going to go down well with Indian Culture and may affect sales adversely. Therefore MNCs must take into consideration the cultural differences before selecting a country for expansion. Countries with radically different cultural values may not be wise choices for expansion.
Legal factors
There are many labor laws that govern the recruitment and compensation of employees by MNCs. Apart from labor laws, MNCs are required to comply with certain regulations regarding registration and investment which have to be followed. Usually MNCs prefer such countries whose legal regulations are not very stringent.
Technological factors
The technological knowhow of a country is a major factor in selecting it for a destination for expansion. India’s expertise in the IT sector has invited many MNCs to shift their operations here. The Chinese technological knowhow in Electronics sector has made it a preferable destination for companies interested to diversify into electronics.
Economic Factors
The demand for a particular product, the GDP of a country and its growth rate are important determinants for choosing a country for expansion. The economic policies may attract many countries if favorable for establishing a unit. These facilities may be special economic zones, tax holidays and other exemptions for a specified period.
Availability of Resources
Certain countries may offer a comparative advantage of resources, like India and china being populous countries offer cheap manpower resources. Similarly India, Malaysia and many other Asian countries have huge natural resources favorable for production of certain commodities and become preferable destinations for expansion of many countries.
Political Factors
MNCs prefer countries that have similar political orientation like the parent country because of ease of adaptation. Democratic countries with liberal affiliations are preferred because they impact expansion positively. Countries that have a feudalistic or communist government are usually avoided for expansion strategies. But this view has been contradicted by (Orozalieva, K., 2010. 11), who observes that undemocratic and developed countries like China or Kazakhstan are preferred destinations for expansion also and selection of a country is also dependent on other important economic, geo-political and social factors.
Recommendations for Formulation of an Effective Human Resource Strategy
The human resource Manager of a MNC must take into consideration the implications of all the above factors while formulating an effective strategy for globalization. A HR strategy must comprise of two essential components: (1) Localization and (2) Training and development of Expatriates.
Localization of Human Resources
Acquisition and retention of local employees serve to minimize resistance in implementing growth strategies. Local Managers can not only communicate with the workforce effectively but also understand their fears and reservations and address them for ensuring cooperation. Localization also takes advantage of the available skills which is more cost efficient than outsourcing or bringing in expatriates. Some countries have a legal regulation that directs employment of local work force for MNCs. Localization enables overcoming of resistance both externally and internally.
A very pertinent example can be cited of LG electronics which established its unit in India and appointed local staff at all levels. LG management involves the local managers in decision making and delegation of responsibilities (Park, Y., Shintaku, J. and Amano, T., 2010. 9). Also localization is inclusive of equal remuneration, equal opportunity for advancement within the organization and transparent and impartial policies for all. This strategy has proved to be very effective for winning the confidence of the local employees and has registered a substantial contribution in diversity management. Local managers not only have a better understanding of cultural values of the employees and take care not to offend them; similarly appointing local corporate lawyers give the MNCs the ability to deal with local legislations.
Training and development of Expatriates
Even if companies implement the policy of hiring local workers, it has to deploy employees from the parent country to enable smooth implementation of technological and management processes, especially at the starting of the expansion and relocation of operations. The expatriates may not be familiar with the language, culture or other environment of the destination country and may commit errors which might jeopardize the company’s plans for growth. Therefore it is necessary that the staff selected for relocation may be trained to adapt to the new environment within the organization and outside. (Ko, H.C. and Yang, M.L., 2011. 158) state that learning about cultures for effective cross cultural communication is imperative for expatriate managers for adapting to a new cultural scenario and execute efficient overseas assignment. The HR management should instruct the expatriates to learn local languages and customs to make transition easier. They may also be advised to solicit suggestions from local colleagues when confronted by a sensitive situation. Visuals and documentaries about the destination countries pay a significant role in providing the geographic and demographic topography of a country.
Transition to new environment may cause stress or conflicting situations; an intensive training program which provides inputs on dealing with such situation keeps the expatriates prepared for such situations and their diffusions. Involving the local HR professionals to handle such situations must be advocated in such situations.
An effective training program must also be formulated to develop the skills to execute the functional responsibilities for expatriates too. Tactful management of local subordinates must be learned to make their stay useful as well as enjoyable.
Conclusion
It can be inferred from the above discussion that transferring operations of a business enterprise is quite a challenging task and require careful planning. Formulation of a human resource strategy may be the most critical of all the functional areas that has to be addressed related to Globalization of activities. The effect of all the factors related to Globalization specific to the destination country must be examined and handled to equip the human resources with the necessary skills to deal with the change.
Hiring domestic staff and training the expatriates to handle workplace responsibilities successfully are two important strategies that should facilitate a smooth implementation of other organizational functions. Localization must include participation in decision making process, equality of opportunities in career development and transparent and unbiased organizational policies.
References
Ko, H.C. and Yang, M.L., 2011. The effects of cross-cultural training on expatriate assignments; Intercultural Communication Studies, 20(1), p.158
Orozalieva, K., 2010. Impact of globalization on socio-economic and political development of the Central Asian countries
Park, Y., Shintaku, J. and Amano, T., 2010; Korean firm’s competitive advantage: localization strategy of LG Electronics (No. 292). Discussion Paper
